Boat financing can be a confusing topic, especially for first-time buyers. The options are much like those offered for a car or RV, but still can be very confusing; what's good for one person might not work for a different financial situation. No matter what your bank account holds, understanding these five basic financing options will help you make the right choice.
1. Click on the tab marked "Loans" at the top of your screen
Yes, we do have financing opportunities right here on boats.com. You can apply with a few clicks or call the boatsbank 800 number. We think you'll like the deals found here, but we'd still encourage everyone to check out all the options available. So before you click on that tab, keep reading. We're not worried—you'll be back.
2. Get a personal loan from your bank
If you have good credit, a personal loan may make a lot of sense. Most banks require 10 to 15 percent down on a boat purchase. Interest rates on personal loans vary, so get quotes from several banks and lenders. But be aware that boat loans typically carry higher interest rates than home or auto loans. Banks have learned that when the economic seas get choppy, people are more likely to paddle away from a boat loan than a home mortgage or an auto loan.
Always ask the lender if you can get a better interest rate by increasing the amount you put up for a down payment. You may also be able to get a better rate by shortening the life of the loan, though naturally, this means a higher monthly payment.
3. Work with your boat dealer
Most dealers are thoroughly experienced at setting up financing, and as long as your credit is good, can often line up a competitive rate. Dealers are happy to assist in this regard because they don't want to lose the sale, and on top of that, many depend on financing as a profit center. (Yes, they do usually get a cut). A key benefit of dealer financing is it’s a simple and quick process for you, the buyer; essentially, the dealer does all the work. In some cases the deal may also come with financing incentives such as no down payment or a low introductory interest rate. There are disadvantages, though. Key among them is often a higher rate. Note, however, that buyers can sometimes reduce the impact of that interest rate by paying off the loan quickly—provided there’s no prepayment penalty.
4. Get a home equity loan
This is an attractive option, primarily because you can deduct the interest you pay on a home equity loan from your federal taxes. However, if you don’t have much equity in your house, you won’t be able to borrow much—which could put a stop to those boat-buying plans. Shop interest rates carefully, as they vary from lender to lender. And carefully sharpen your pencil too, to confirm you can pay both your mortgage and the home equity loan, without any problems.
5. Fantastic plastic
Yes, sure, credit cards are an option. But they aren't a particularly good one, especially for a major purchase like this since the interest rates are often high. It only makes sense as a last resort, or as a stop-gap measure to get a boat fast, when you know you'll be able to pay off the loan soon.
Want to find out more about how you can make boating more affordable? Take a look at:
Sailing on a Budget: 6 Ways to Avoid Breaking the Bank
Six Great Starter Boats
Affordable Boating: 5 Ways to Avoid Breaking the Bank
Five Affordable Trawlers Under 40 Feet